SOUTH CAROLINA

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LAWS OF SOUTH CAROLINA

Simple Mechanic’s Lien Rules for Contractors and Subcontractors
Doing Construction Business in the State of SOUTH CAROLINA

Prepared by: Craig R. Altman – President, TRADITION SOFTWARE, INC.

Both General Contractors and Subcontractors have 1st notices that must be posted or sent at the start of a construction project. SOUTH CAROLINA Code Annotated § 29-5-23 mandates that a Location Notice and Notice Of Project Commencement be posted at a jobsite by the General Contractor. SOUTH CAROLINA Code Annotated § 29-5-23 also mandates that General/Prime Contractors must record a Notice Of Project Commencement with the clerk of court or register of deeds in the county where the improvment is located.

SOUTH CAROLINA Code Annotated § 29-5-40 mandates that when a General/Prime Contractor has filed a Notice Of Project Commencement, in order for a Subcontractor to ensure the full amount owed can be collected on a lien for a private project, a Subcontractor must deliver by Certified Mail or personal delivery a Notice Of Furnishing Labor Or Materials to the legal parties (Customer, Owner, General/Prime Contractor, Lender) on the project.

General/Prime/Sub Contractors (Private Projects): SOUTH CAROLINA Code Annotated § 29-5-90 mandates that a Notice Of Mechanic’s Lien (General/Prime Contractor) should be filed by a General/Prime/Sub Contractor no later than ninety (90) days after the completion of furnishing equipment, labor, materials or services for an improvement. It should be recorded with the register of deeds or the clerk in the county where the improved property is located.

(a) A person to whom a debt is due for labor performed or furnished or for materials furnished and actually used in the erection, alteration, or repair of a building or structure upon real estate or the boring and equipping of wells, by virtue of an agreement with, or by consent of, the owner of the building or structure, or a person having authority from, or rightfully acting for, the owner in procuring or furnishing the labor or materials shall have a lien upon the building or structure and upon the interest of the owner of the building or structure in the lot of land upon which it is situated to secure the payment of the debt due to him. The costs which may arise in enforcing or defending against the lien under this chapter, including a reasonable attorney’s fee, may be recovered by the prevailing party. The fee must be determined by the court in which the action is brought but the fee and the court costs may not exceed the amount of the lien. As used in this section, labor performed or furnished in the erection, alteration, or repair of any building or structure upon any real estate includes the preparation of plans, specifications, and design drawings and the work of making the real estate suitable as a site for the building or structure. The work is considered to include, but not be limited to, the grading, bulldozing, leveling, excavating, and filling of land (including the furnishing of fill soil), the grading and paving of curbs and sidewalks and all asphalt paving, the construction of ditches and other drainage facilities, and the laying of pipes and conduits for water, gas, electric, sewage, and drainage purposes. Any private security guard services provided by any person at the site of the building or structure during its erection, alteration, or repair is considered to be labor performed or furnished within the meaning of this section. As used in this section, materials furnished and actually used include tools, appliances, machinery, or equipment supplied for use on the building or structure to the extent of their reasonable rental value during their actual use. “Person” as used in this section means any individual, corporation, partnership, proprietorship, firm, enterprise, franchise, association, organization, or other entity. For purposes of this section, the term “materials” includes flooring, floor coverings, and wall coverings.

(b) Not less than fifteen days before the first term of court at which the trial is set, either party may file and serve on the other party an offer of settlement, and within ten days thereafter the party served may respond by filing and serving his offer of settlement. The offer shall state that it is made under this section and specify the amount, exclusive of interest and costs, which the party serving the offer is willing to agree constitutes a settlement of the lien. The offer supersedes any offer previously made under this section by the same party. An offer of settlement is considered rejected unless an acceptance in writing is filed and served on the party making the offer, five days before the commencement of the term. If the offer is rejected, it may not be referred to for any purpose at the trial, but may be considered solely for the purpose of awarding costs and litigation expenses under this section. If a written offer of settlement is made by both parties, the party whose offer is closer to the verdict reached is considered the prevailing party in the action. If the difference between both offers and the verdict is equal, neither party is considered to be the prevailing party for purposes of determining the award of costs and attorney’s fees. If the plaintiff makes no written offer of settlement, the amount prayed for in his complaint is considered to be his final offer of settlement for purposes of this section. If the defendant makes no written offer of settlement, his offer of settlement is considered to be zero.

(A) Every laborer, mechanic, subcontractor, or person furnishing material for the improvement of real estate when the improvement has been authorized by the owner has a lien thereon, subject to existing liens of which he has actual or constructive notice, to the value of the labor or material so furnished, including the costs of the action and a reasonable attorney’s fee which must be determined by the court in which the action is brought but only if the party seeking to enforce the lien prevails. If the party defending against the lien prevails, the defending party must be awarded costs of the action and a reasonable attorney’s fee as determined by the court. The fee and the court costs may not exceed the amount of the lien. The lien may be enforced as herein provided.

(B) In no event shall the aggregate amount of any liens filed by a sub-subcontractor or supplier exceed the amount due by the contractor to the subcontractor to whom the sub-subcontractor or supplier has supplied labor, material, or services unless the sub-subcontractor or supplier has provided notice of furnishing labor or materials by certified or registered mail to the contractor. Such notice of furnishing labor or materials shall include:

(1) the name of the sub-subcontractor or supplier who claims payment;

(2) the name of the person with whom the claimant contracted or by whom he was employed;

(3) a description of the labor, services, or materials furnished and the contract price or value thereof. Materials specially fabricated by a person other than the one giving notice and the contract price or value thereof shall be separately stated in the notice;

(4) a description of the project where labor, services, or materials were used sufficient for identification;

(5) the date when the first and the last item of labor or service or materials was actually furnished or scheduled to be furnished; and

(6) the amount claimed to be due, if any.

After receiving such notice, no payment by the contractor to the subcontractor will lessen the amount recoverable by the person so giving notice. However, in no event shall the total aggregate amount of liens on the improvement exceed the amount due by the owner.

(C) Not less than fifteen days before the first term of court at which the trial is set, either party may file and serve on the other party an offer of settlement, and within ten days thereafter the party served may respond by filing and serving his offer of settlement. The offer shall state that it is made under this section and specify the amount, exclusive of interest and costs, which the party serving the offer is willing to agree constitutes a settlement of the lien. The offer supersedes any offer previously made under this section by the same party. An offer of settlement is considered rejected unless an acceptance in writing is filed and served on the party making the offer five days before the commencement of the term. If the offer is rejected, it may not be referred to for any purpose at the trial, but may be considered solely for the purpose of awarding costs and litigation expenses under this section. If a written offer of settlement is made by both parties, the party whose offer is closer to the verdict reached is considered the prevailing party in the action. If the difference between both offers and the verdict is equal, neither party is considered to be the prevailing party for purposes of determining the award of costs and attorney’s fees. If the plaintiff makes no written offer of settlement, the amount prayed for in his complaint is considered to be his final offer of settlement for purposes of this section. If the defendant makes no written offer of settlement, his offer of settlement is considered to be zero.

(D) Subsection (B) does not apply to individual laborers when the amount of their lien is less than two thousand dollars.

29-5-21 Surveyors Lien

A surveyor who surveys real estate by virtue of an agreement with the owner of such real estate shall be considered to have furnished material for the improvement of real estate within the meaning of § 29-5-20.

29-5-22 Liens for Tools, Appliances, and Equipment

A person who supplies tools, appliances, machinery, or equipment used as provided in Section 29-5-10(a) is considered to have furnished material for the improvement of real estate within the meaning of Sections 29-5-20 and 29-5-40 to the extent of the reasonable rental value of the tools, appliances, machinery, or equipment for the period of actual use.

29-5-23 Notice of Project Commencement, Filing, Failure to File

Any person entering into a direct agreement with, or with the consent of, an owner for the improvement of real property may file with the Clerk of Court or Register of Deeds in the county or counties where the real property is situate a Notice of Project Commencement. The Notice of Project Commencement shall contain the following information:

(1) the name and address of the person filing the Notice of Commencement;

(2) the name and address of the owner or developer;

(3) a general description of the improvement; and

(4) the location of the project.

The notice must be filed within fifteen days of the commencement of work and must be accompanied by a filing fee of fifteen dollars to be deposited in that county’s general fund. The name and address of the contractor must be posted at the job site. A location notice also must be posted at the job site. The location notice must contain the following statement:

“The contractor on the project has filed a Notice of Project Commencement at the County Courthouse. Sub-subcontractors and suppliers to subcontractors shall comply with Section 29-5-20 when filing liens in connection with this project.” The failure to file a Notice of Project Commencement shall render the provisions of Sections 29-5-20(B) and 29-5-60(B) inapplicable. The filing of a Notice of Project Commencement shall not constitute a cloud, lien, or encumbrance upon, or defect to, the title of the real property described in the notice, nor shall it alter the aggregate amounts of liens allowable under Section 29-5-40, nor shall it affect the priority of any mortgage filed before or after the notice, nor shall it affect any future advances under any mortgage. The Clerk of Court or Register of Deeds in each county shall maintain a separate book and index of all notices of project commencements.

29-5-25 Guard Services

Any person providing private security guard services at the site of the real estate during its improvement shall be deemed to be a laborer within the meaning of sections 29-5-20 and 29-5-40. “Person” as used in this section shall mean any individual, corporation, partnership, proprietorship, firm, enterprise, franchise, association, organization or other such entity.

29-5-30 Less Than Fee Simple Estate

If the person for whom the work is done or materials are furnished has an estate for life or any other estate less than a fee simple in the land or if the property, at the time of recording the statement, is mortgaged or under any other encumbrance, the lien before provided for shall bind his whole estate and interest therein in like manner as a mortgage would have done and the creditor may cause the right of redemption or whatever other right or estate the owner had in the property to be sold and applied to the discharge of his debt, according to the provisions of this chapter.

29-5-40 Notice to Owner

Whenever work is done or material is furnished for the improvement of real estate upon the employment of a contractor or some other person than the owner and such laborer, mechanic, contractor or materialman shall in writing notify the owner of the furnishing of such labor or material and the amount or value thereof, the lien given by § 29-5-20 shall attach upon the real estate improved as against the true owner for the amount of the work done or material furnished. But in no event shall the aggregate amount of liens set up hereby exceed the amount due by the owner on the contract price of the improvement made.

29-5-50 References

Any person claiming a lien under the provisions of this chapter who shall have given the notice provided for herein shall be entitled to be paid in preference to the contractor at whose instance the labor was performed or material furnished and no payment by the owner to the contractor thereafter shall operate to lessen the amount recoverable by the person so giving the notice.

29-5-60 Prorations

(A) In the event the amount due the contractor by the owner is insufficient to pay all the lienors acquiring liens as herein provided it is the duty of the owner to prorate among all just claims the amount due the contractor.

(B) In the event the amount due a subcontractor by the contractor is insufficient to pay all the lienors acquiring liens under Section 29-5-20 as a result of supplying labor, materials, or services to that subcontractor, all just liens must be prorated by the contractor among sub subcontractors and suppliers to that subcontractor.

29-5-70 Priority of Mortgage

Except as otherwise provided in Section 29-3-50, a lien claimed by any mechanic or materialman furnishing labor, services, or material is not enforceable against any mortgage recorded before the filing of the notice pursuant to Section 29-5-90 setting forth the statement of account upon which the lien is based.

29-5-80 Notice of Nonresponsibility

The owner of any such building or structure in process of erection or being altered or repaired, other than the person by whom or in whose behalf a contract for labor or materials has been made, may prevent the attaching of any lien for labor thereon not at the time performed or materials not then furnished by giving notice, in writing, to the person performing or furnishing such labor or furnishing such materials that he will not be responsible therefore.

29-5-90 Statement of Just and True Account

Such a lien shall be dissolved unless the person desiring to avail himself thereof, within ninety days after he ceases to labor on or furnish labor or materials for such building or structure, serves upon the owner or, in the event the owner cannot be found, upon the person in possession and files in the office of the register of deeds or clerk of court of the county in which the building or structure is situated a statement of a just and true account of the amount due him, with all just credits given, together with a description of the property intended to be covered by the lien sufficiently accurate for identification, with the name of the owner of the property, if known, which certificate shall be subscribed and sworn to by the person claiming the lien or by someone in his behalf and shall be recorded in a book kept for the purpose by the register or clerk who shall be entitled to the same fees therefore as for recording mortgages of equal length. Provided, that in the event neither the owner nor the person in possession can be located after diligent search, and this fact is verified by affidavit of the sheriff or his deputy, the lien may be preserved by filing the statement together with the affidavit. The delivery on the register or clerk for filing, as provided in this section, shall be and constitute the delivery contemplated with regard to such liens in Title 30 of this Code.

29-5-100 Inaccuracy in Statement

No inaccuracy in such statement relating to the property to be covered by the lien, if the property can be reasonably recognized, or in stating the amount due for labor or materials shall invalidate the proceedings, unless it appear that the person filing the certificate has willfully and knowingly claimed more than is his due.

29-5-110 Release Bond

At any time after service and filing of the statement required under § 29-5-90 the owner or any other person having an interest in or lien upon the property involved may secure the discharge of such property from such lien by filing in the office of clerk of court or register of deeds where such lien is filed his written undertaking, in an amount equal to one and one-third times the amount claimed in such statement, secured by the pledge of United States or State of South Carolina securities, by cash or by a surety bond executed by a surety company licensed to do business in this State, and upon the filing of such undertaking so secured the lien shall be discharged and the cash, securities or surety bond deposited shall take the place of the property upon which the lien existed and shall be subject to the lien. In the event of judgment for the person filing such statement in a suit brought pursuant to the provisions of this chapter, such judgment shall be paid out of the cash deposited or, in event of pledge of securities, it shall be paid from the proceeds of a sale of so much of the pledged securities as shall be necessary to satisfy such judgment or, in event of the filing of a surety bond, the surety company issuing such bond shall pay such amount found due, not to exceed the amount of the bond. Unless suit for enforcement of the lien is commenced as required by § 29-5-120, the undertaking herein required shall be null and void and the principal therein shall have the right to have it canceled and such cash or securities deposited or pledged or surety bond filed shall be released from the lien herein provided.

29-5-120 Limitations

Unless a suit for enforcing the lien is commenced, and notice of pendency of the action is filed, within six months after the person desiring to avail himself thereof ceases to labor on or furnish labor or material for such building or structures, the lien shall be dissolved.

29-5-130 Magistrate’s Court

When the amount of the claim does not exceed one hundred dollars the lien may be enforced by a petition to a magistrate. And such magistrate shall have like power and authority within his jurisdiction as herein conferred upon the court of common pleas, with like rights of appeal to the parties as exist in other civil cases.

29-5-140 Enforcement Petition

The lien may be enforced by petition to the court of common pleas for the county in which the building or structure is situated. The petition may be filed in term or in the clerk’s office in vacation and the date of the filing shall be deemed the commencement of the suit.

29-5-150 Service of Petition

The petition may be served with the summons or filed with the clerk and shall be returned and entered as other civil cases.

29-5-160 Contents of Petition

The petition shall contain a brief statement of the contract on which it is founded and of the amount due thereon, with a description of the premises subject to the lien and all other material facts and circumstances, and shall pray that the premises may be sold and the proceeds of the sale applied to the discharge of the demand.

29-5-170 Joinder

Any number of persons who have actually performed labor or furnished labor or materials on one or more buildings or structures upon different lots of land, when the labor was performed for the same owner, contractor or other person, may join in the same petition for their respective liens and the same proceedings shall be had in regard to the rights of each petitioner and the respondent may defend as to each petitioner in the same manner as if he had severally petitioned for his individual lien.

29-5-180 Amendment

The court may at any time allow either party to amend his pleadings as in other civil actions.

29-5-190 Notice to Owner

The court in which the petition is entered shall order notice to be given to the owner of the building or structure, that he may appear and answer thereto at a certain day in the same term or at the next term, by serving him with an attested copy of the petition, with the order of the court thereon, fourteen days at least before the tone assigned for the hearing. And the court shall also order notice of the filing of the petition to be given to all other creditors who have a lien of the same kind upon the same estate by serving them with a copy of the last mentioned order in like manner.

29-5-200 Service by Publication

If it appears to the court that any of the parties entitled to notice are absent or that they cannot probably be found or be served with the notice, the court may, instead of the personal notice before mentioned or in addition thereto, order notice given to all persons interested by publishing in some newspaper the substance of the petition with the order of the court thereon assigning the time and place for a hearing or may order such other notice to be given as may, under the circumstances of the case, be considered most proper and effectual.

29-5-210 Further Notice

If at the time assigned for the hearing it appears to the court that any of the persons interested had not had a sufficient notice of the suit, the court may order further notice to them in such manner as may be considered most proper and effectual.

29-5-220 Proof of Claims

At the time assigned for the hearing, or within such further time as the court allows for that purpose, every creditor having a lien of the kind before mentioned upon the same property may appear and prove his claim and the owner and each of the creditors may contest the several claims of every other creditor and the court shall hear and determine them in a summary manner, either with or without a jury, as the case may require.

29-5-230 Jury

Every material question of fact arising in the case shall be submitted to a jury, if required by either party or deemed proper by the court, and the trial shall be had upon a question stated or an issue framed or otherwise, as the court may order. A jury shall be had before a magistrate only as in other civil cases.

29-5-240 Claims That Are Due But Not Payable

The court shall ascertain and determine the amount due to each creditor who has a lien of the kind before mentioned upon the property in question and every such claim due, absolutely and without any condition, although not then payable, shall be allowed with a rebate of interest to the time when it would become payable.

29-5-250 Prevention of Performance

When the owner fails to perform his part of the contract and by reason thereof the other party, without his own default, is prevented from completely performing his part, he shall be entitled to a reasonable compensation for as much as he has performed in proportion to the price stipulated for the whole and the court shall adjust his claim accordingly.

29-5-260 Sale of Property

If the lien is established in favor of any of the creditors whose claims are presented the court shall order a sale of the property to be made by such officer as may be authorized by law to make sales of property.

29-5-270 Partition

If part of the property can be separated from the residue and sold without damage to the whole and if the value thereof is sufficient to satisfy all debts proved in the case, the court may order a sale of that part, if it appears to be most for the interest of all parties concerned.

29-5-280 Notice of Sale

The officer who makes the sale shall give notice of the time and place in the manner prescribed in relation to the sale of mortgaged lands under foreclosure, unless the court orders a different notice to be given.

29-5-290 Distribution of Proceeds

If all the claims against the property covered by the lien are ascertained at the time of ordering the sale, the court may order the officer to pay over and distribute the proceeds of the sale, after deducting all lawful charges and expenses, to and among the several creditors to the amount of their respective debts, if there is sufficient therefore, and if there is not sufficient, then to divide and distribute such proceeds among the creditors in proportion to the amount due to each of them.

29-5-300 Postponement of Distribution

If all the claims are not ascertained when the sale is ordered or if for any other reason the court finds it necessary or proper to postpone the order of distribution, it may direct the officer to bring the proceeds of the sale into court, there to be disposed of according to the decree of the court, and if, by reason of the claims of attaching creditors or for any other cause, the whole cannot be conveniently distributed at once the court may make two or more successive orders of distribution, as the circumstances may require.

29-5-310 Surplus

If there remain any surplus of the proceeds of the sale, after making all the payments before mentioned, it shall be forthwith paid over to the owner of the property, but such surplus, before it is so paid over, shall be liable to be attached or taken on execution in like manner as if it proceeded from a sale made by the officer on an execution.

29-5-320 Attaching Creditor

If the interest of the owner in the building, structure or land is under attachment at the time of filing and recording the statement of the account, the attaching creditor shall be preferred to the extent of the value of the buildings and land as they were when the statement was recorded and the court shall ascertain, by a jury or otherwise as the case may require, what proportion of the proceeds of the sale shall be held subject to the attachment as derived from the value of the property when the statement was recorded.

29-5-330 Distribution of Proceeds After Attachment

If the attaching creditor recovers judgment he shall be entitled to receive on his execution the proportion of the proceeds held subject to his attachment, or so much thereof as may be necessary to satisfy his execution, and the residue of the proceeds shall be applied in the same manner as if there had been no such attachment.

29-5-340 Distribution of Proceeds After Attachment

If the interest of the owner of the property is attached after the recording of the statement, the proceeds, after discharging all prior liens and claims, shall be applied to satisfy the execution of such attaching creditor.

29-5-350 Priority of Attachment

If an attachment is made after the recording of such statement and if, after the attachment, another like statement is recorded, the creditor in the latter statement shall be entitled to be paid only out of the residue of the proceeds remaining after paying all that is due on the demand a statement of which was recorded before the attachment and satisfying the attaching creditor.

29-5-360 Several Attaching Creditors

When there are several attaching creditors, they shall, as between themselves, be entitled to be paid according to the order of their attachments. But when several creditors who are entitled to the lien provided for in this chapter have equal rights as between themselves and the fund is insufficient to pay the whole, they shall share it equally in proportion to their respective debts.

29-5-370 Transfer or Conveyance, Death

If the person indebted dies or conveys away his estate or interest before the commencement of a suit on the contract, the suit may be commenced and prosecuted against his heirs or whoever holds the estate or interest which he had in the premises at the time the labor or materials were performed or furnished. Or, if a suit is commenced in his lifetime, it may be prosecuted against his executors, administrators, heirs or assigns in like manner as if the estate or interest had been mortgaged to secure the debt.

29-5-380 Personal Representative

If a creditor dies before the commencement of the suit, the suit may be commenced and prosecuted by his executor or administrator or, if commenced in his lifetime, it may be prosecuted by them as it might have been by the deceased, if living.

29-5-390 Prosecution by Another Creditor

If it appears in any stage of the proceedings that the suit was commenced by the petitioning creditor before his right of action accrued or after it was barred or if he becomes nonsuited or fails to establish his claims the suit may be prosecuted by any other creditor having such lien in the same manner as if it had been originally commenced by him, if the circumstances of the case are such that he might then or at any time after the commencement of the original suit have commenced a like suit on his own claim.

29-5-400 Costs

If the suit is commenced by the petitioning creditor before his right of action accrues, his claim may nevertheless be allowed if the suit is carried on by any other creditor, as provided in section 29-5-390, but he shall not in such case be entitled to costs and he may be required to pay the costs incurred by the debtor or such part thereof as the court may deem reasonable.

29-5-410 Other Costs

The costs, in all other respects, shall be subject to the discretion of the court and shall be paid from the proceeds of the sale or by any of the parties to the suit, as justice and equity require.

29-5-420 Personal Action

Nothing contained in this chapter shall be construed to prevent a creditor in such contract from maintaining an action thereon in like manner as if he had no such lien for the security of his debt.

29-5-430 Discharge of Lien

When a debt secured by such a lien is fully paid, the creditor, at the expense of the debtor, shall enter on the margin of the registry where the statement is recorded a discharge of his lien or shall execute a release thereof, which may be recorded where the statement is recorded.

CHAPTER 6 PAYMENTS TO CONTRACTORS, SUBCONTRACTORS, AND SUPPLIERS

29-6-10 Definitions

Unless the context otherwise requires in this chapter:

(1) “Contractor” means a person who contracts with an owner to improve real property or perform construction services for an owner.

(2) “Improve” means to build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill, or landscape any real property, or to construct driveways and roadways, or to furnish materials, including trees and shrubbery, for any of these purposes, or to perform any labor upon these improvements, and also means and includes any design or other professional or skilled services furnished by architects, engineers, land surveyors, and landscape architects.

(3) “Improvement” means all or any part of any building, structure, erection, alteration, demolition, excavation, clearing, grading, filling, or landscaping, including trees and shrubbery, driveways, and roadways on real property.

(4) “Owner” means a person who has an interest in the real property improved and for whom an improvement is made and who ordered the improvement to be made. “Owner” includes any state, local, or municipal government agencies, instrumentalities, or entities.

(5) “Real property” means the real estate that is improved, including lands, leaseholds, tenements, and hereditaments, and improvements placed on the real property.

(6) “Subcontractor” means any person who has contracted to furnish labor or materials to, or has performed labor or supplied materials for, a contractor or another subcontractor in connection with a contract to improve real property.

29-6-20 Entitlement to Payment

Performance by a contractor or subcontractor in accordance with the provisions of his contract entitles him to payment from the party with whom he contracts.

29-6-30 Time for Payments

When a contractor or a subcontractor has performed in accordance with the provisions of his contract, the owner shall pay the contractor by mailing via first class mail or delivering the undisputed amount of any pay request within twenty-one days of receipt by the owner of any pay request based upon work completed or service provided under the contract, and the contractor shall pay to his subcontractor and each subcontractor shall pay to his subcontractor, within seven days of receipt by the contractor or subcontractor of each periodic or final payment, by mailing via first class mail or delivering the full amount received for that subcontractor’s work and materials based on work completed or service provided under the subcontract.

29-6-40 Grounds to Withhold Payment

Nothing in this chapter prevents the owner, the contractor, or a subcontractor from withholding application and certification for payment because of the following: unsatisfactory job progress, defective construction not remedied, disputed work, third party claims filed or reasonable evidence that claim will be filed, failure of contractor or subcontractor to make timely payments for labor, equipment, and materials, damage to owner, contractor, or another subcontractor, reasonable evidence that contract or subcontract cannot be completed for the unpaid balance of the contract or subcontract sum, or a reasonable amount for retainage. Nothing in this chapter requires that payments due a contractor from an owner be paid any more frequently than as set forth in the construction documents, nor shall anything in this chapter affect the terms of any agreement between the owner and any lender.

29-6-50 Agreements as Interest, Exemptions

If a periodic or final payment to a contractor is delayed by more than twenty- one days or if a periodic or final payment to a subcontractor is delayed by more than seven days after receipt of periodic or final payment by the contractor or subcontractor, the owner, contractor, or subcontractor shall pay his contractor or subcontractor interest, beginning on the due date, at the rate of one percent a month or a pro rata fraction thereof on the unpaid balance as may be due. However, no interest is due unless the person being charged interest has been notified of the provisions of this section at the time request for payment is made. Nothing in this chapter shall prohibit owners, contractors, and subcontractors, on private construction projects only, from agreeing by contract to rates of interest and payment periods different from those stipulated in this section, and in this event, these contractual provisions shall control, provided the requirements of Section 29-6-30 and this section are specifically waived, by section number, in conspicuous bold-faced or underlined type. In case of a willful breach of the contract provisions as to time of payment, the interest rate specified in this section shall apply.

29-6-60 Application of Chapter

The provisions of this chapter do not apply to:

(1) residential homebuilders;

(2) improvements to real property intended for residential purposes which consist of sixteen or fewer residential units; or

(3) private persons or entities owning improvements to real property when the specific improvements are not financed by a nonowner.

CHAPTER 7 LIENS OF LABORERS AND OTHERS ON CONTRACT PRICE

29-7-10 Lien on Construction Funds

Any contractor or subcontractor in the erection, alteration, or repairing of buildings in this State shall pay all laborers, subcontractors, and materialmen for their lawful services and material furnished out of the money received for the erection, alteration, or repairs of buildings upon which such laborers, subcontractors, and materialmen are employed or interested and such laborers, as well as all subcontractors and persons who shall furnish material for any such building, shall have a first lien on the money received by such contractor for the erection, alteration, or repair of such building in proportion to the amount of their respective claims. Any person providing private security guard services at the site of the building during its erection, alteration, or repair shall be deemed to be a laborer within the meaning of this section. Nothing herein contained shall make the owner of the building responsible in any way and nothing contained in this section shall be construed to prevent any contractor or subcontractor from borrowing money on any such contract. “Person” as used in this section shall mean any individual, corporation, partnership, proprietorship, firm, enterprise, franchise, association, organization, or other such entity.

29-7-20 Diversion of Funds, False Certificates, Penalties, Offsets

(1) A contractor or subcontractor who, for other purposes than paying the money loaned upon such contract, transfers, invests or expends and fails to pay to a laborer, subcontractor, or materialman out of the money received as provided in Section 29-7-10 is guilty of a misdemeanor and, upon conviction, when the consideration for the work and material exceeds the value of one hundred dollars must be fined not less than five hundred dollars nor more than one thousand dollars or imprisoned not less than three months nor more than six months and when such consideration does not exceed the value of one hundred dollars must be fined not more than five hundred dollars or imprisoned not longer than thirty days.

(2) Any person who willfully and intentionally certifies to any owner or lending institution by affidavit or otherwise that all persons, firms, or corporations including subcontractors and materialmen having furnished services, labor, or materials or extra items used in the construction, improvement, or repair to the owner’s building or real property have been paid in full, when such persons have not been paid in full, except with regard to services or materials concerning which all lien rights have been waived in writing, shall be deemed guilty of a misdemeanor and, upon conviction, shall be fined not more than five thousand dollars or imprisoned not more than sixty days, or both. Provided, however, that an agreement to waive the right to file or claim a lien for labor and materials is against public policy and is unenforceable unless payment substantially equal to the amount waived is actually made.

(3) Unless otherwise provided in an agreement between the parties, a contractor or subcontractor may set off, against the money upon which a laborer, subcontractor, or materialman has a lien as provided by Section 29-7-10, any debt claimed to be owed to the contractor by such laborer, subcontractor, or materialman, based upon a good faith claim that those services and materials for which payment is claimed by the laborer, subcontractor, or materialman were defective. In order to make such a set-off, a declaration and accounting thereof must be included in any certificate submitted with an application for payment and a copy thereof or a separate notarized original of the declaration must be sent by certified mail to the affected laborer, subcontractor, or materialman at the time the certificate is submitted.

29-7-30 Arbitration

Any contractor or subcontractor may have the right of arbitration by agreement with any such laborer, subcontractor or materialman.